Dmitry Nekrasov’s Philosophy — on the Past, Present and Future of Ukrainian Brewing IndustryA meeting with Dmitry Nekrasov always turns into a training course: “Introduction to brewing business“. We are talking to a clever “playing trainer“ a person that can be called a godfather of the Ukrainian craft. He has a dozen of successful projects to his name. Dmitry told us about craft beer in Ukraine, on market cycles, on specifity of operating in retail and HoReCa, on union of Ukrainian brewers and certainly, how a brewery of his own, First Dnipro Brewery is doing.
The market of import beer in Russia: review and databasesThe market of import beer is rapidly growing and changing. But while in the past years it was growing due to brands variety, in 2019 major and affordable brands from TOP-10 were developing actively. It seems that the fact of a brand origin from far abroad counties, even if it is not well known but has moderate price and good distribution provides for million liters of sales in the territory of Russia. Among distributors AB InBev Efes was far behind, yet the role of Baltika and suppliers of the second row got more important. The boom of German brands was followed by stagnation of import from other traditional regions (and Belarus) instead the supplies from Mexico, Lithuania and Asian countries grew considerably.
Russia: Positions of Brewing CompaniesThe review contains an analysis of interim performance of brewers in the first half of 2019. There are rather dynamic changes behind a modest industry growth. Baltika is again experiencing a stage of volumes and market share slid due to competition with AB InBev Efes. Because of the price competition and presence expansion in the modern trade company #2. has come close to the leading position. At the same time sales of Heineken Russia have continued growing which makes the premium part of the portfolio heavier. The market premiumization trend had been also confirmed by import brands. MBC and Zavod Trekhsosenskiy have been the most successful among federal market players. The market share of independent regional brewers and Ochakovo have continued falling as they are being squeezed out by the market leaders at their competitive fields.
Ukrainian beer market 2019: companies and brandsIn 2019 beer production and market have been still fluctuating about zero point. However, the past season was successful for brewers judging by the sales profitability. The price mix has improved due to rapid general market premiumization, as well as its particular aspect, the growth of import beer sales. By the season end AB InBev Efes improved its positions considerably. It turned out that consumers had not forgot Efes brands that had to leave the market, but started to recover rapidly. Against the stagnating market that meant sales decline of other companies, in the first place Carlsberg Group that most of all beneficiated from Efes exiting the market. PPB turned out to be stable to branding activity of its competitor and Obolon kept the same volumes and at the moment it is the absolute leader of the economy segment. The share growth of independent producers took place thanks to leading craft breweries, that so far do not have a big market weight, but they are rapidly gaining it.
Brewing industry in Kazakhstan 2019During the first half of 2019, the majority of Kazakh brewers made their contribution into positive dynamics. Yet it was companies of the lower division, not the two transnational leaders that raised their production and sales. The shares of draft beer and aluminum can which is rapidly squeezing glass bottle out of the market, have been growing. The price segmentation has remained stable despite the substantial rise of retail prices and fluctuations of brand market shares, while the borders between segments have become blurred. The main events in the industry have been: the announced revision of the beer excise policy, launch of BeerKhan brand in the strong beer segment, and most important – purchasing assets of Shymkentbeer by Arasan.
The trend of complication of Russian beer market is going on and in several directions at the same time. The range has got wider, the import and small segments are growing, namely craft beer, alcohol-free beer and special flavor beer. At the same time, all ex-mega brands and light lagers by Russian brewers are experiencing a decline of their shares. AB InBev Efes, Heineken, MBC and Pivzavod Trekhsosenskiy have exceeded the market, Carlsberg was developing slower than the market and Ochakovo as well as some other mid-sized breweries have been cutting down their volumes. To a big extent brewers’ performance was connected to their ability to reach agreement with networks, sacrifice their margin and enter new markets. Craft brewers are facing a serious danger of producers’ registration introduction – de facto licensing. ...
US. The Coming Threat to Your Craft Brew
Heffernan takes an odd angle to set up his story. Hyperconsolidation of the kind seen in the beer industry drives down consumer prices, he writes, and low prices for alcohol lead to excessive drunkenness. More on that below—I think Heffernan might be off here. But what caught my eye was his discussion of the way the beer giants are squeezing suppliers and wholesalers to take control of the retail shelf—and potentially squeezing out independent craft brewers, whose wares (which I adore) have taken off in the past 20 years even as the giants consolidated.
Heffernan's piece mentions a March 2012 interview in the trade publication Beer Business Daily, in which Anheuser-Busch InBev Vice President Dave Almeida "described in perfect detail how retailers can maximize their profits by replacing craft brews with 'premium' beer—its term for its mass-produced light lager." I looked up the interview , and it is amazing. Here's the relevant passage:
"Craft is a real threat, but it's also an opportunity," [Anheuser-Busch InBev Vice President Dave Almeida said]…Dave showed research that indicated that retailers that have too many SKUs actually end up selling less overall beer. He used the example of the health and beauty aids aisle in a supermarket, where consumers spend an average of 90 seconds and only buy something 25% of the time, whereas people spend 31 seconds in the beer aisle and buy something 75% of the time. "Retailers that are winning are not invested in craft to the detriment to the category," said Dave. Later Dave and his national accounts team walked me through a deck showing that chains that over-SKU with crafts end up selling less beer and making less profit than chains that protect their domestic premium space.
"Craft is a real threat, but it's also an opportunity," said Anheuser-Busch InBev's vice president.
Okay, let's unpack this. Craft beer has grown dramatically in popularity, and now makes up 6 percent of the total market. And while no individual craft brewer, not even the largest ones like Sierra Nevada, is big enough to pose a threat to Miller and Bud, the industry as a whole, from national brands like Sierra Nevada to your favorite local brew, are taking shelf space from the Big Two. Newsflash: The Big Two want that shelf space back. The retail jargon "SKUs" stands for "stock-keeping unit," a coding system used by retailers to track inventory. "Too many SKUs" translates to "too many unique products." What the beer exec is saying is that supermarkets and corner stores might think they make more money by finding space on the shelves for independent craft beers, but they actually sell more beer and book more profits by dropping craft beers and sticking with the giants.
And the giants are now peddling faux craft beers like InBev's Shock Top or SABMiller's Pale Moon. So if you're running the beer cooler of the retail outlet, you'd do better to offer a couple of corporate-made craft knockoffs than a dozen genuine craft brews. "Craft is a real threat," because it represents a growing thirst for real beer; "but it's also an opportunity," because that thirst can be co-opted by knockoffs.
If the InBev exec's economic analysis is correct and retailers heed his advice, then we could be on the verge of a hard squeeze on what I consider to be one of the most promising aspects of the US culinary scene : the rise of an incredibly robust, varied, and regionally distributed craft-brew industry. They already struggle to get retail space as the once-independent beer wholesale/distribution falls increasingly under the heel of the giants. But if retailers decide they don't want craft beer, because they make more profit from corporate swill, then it's hard times for craft brewers.
Heffernan's discussion of Big Beer's push to roll up distribution and wholesaling is excellent. I'm less convinced by his frame: that it's bad because it means cheaper beer and more alcohol abuse. To make his case, Heffernan points across the Atlantic to the UK:
England has a drinking problem. Since 1990, teenage alcohol consumption has doubled. Since World War II, alcohol intake for the population as a whole has doubled, with a third of that increase occurring since just 1995. The United Kingdom has very high rates of binge and heavy drinking, with the average Brit consuming the equivalent of nearly ten liters of pure ethanol per year.
Here in the United States, by contrast:
The United States, although no stranger to alcohol abuse problems, is in comparatively better shape. A third of the country does not drink, and teenage drinking is at a historic low. The rate of alcohol use among seniors in high school has fallen 25 percentage points since 1980. Glassing ["busting a bottle across someone’s face in a bar"] is something that happens in movies, not at the corner bar.
What's the difference? In the United Kingdom, the alcohol market is horizontally as well as vertically integrated—that is, a few companies not only make most of the beer (horizontal consolidation) but they also control distribution and wholesaling (vertical). "These vertically integrated monopolies are very 'efficient' in the economist's sense," Heffernan writes, "in that they do a very good job of minimizing the price and thereby maximizing the consumption of alcohol." Here in the United States, remnants of Depression-era laws maintain a quasi-independent set of wholesalers and distributors as part of a "three-tier" system. Heffernan explains:
The idea is that brewers and distillers, the first tier, have to distribute their product through independent wholesalers, the second tier. And wholesalers, in turn, have to sell only to retailers, the third tier, and not directly to the public. By deliberately hindering economies of scale and protecting middlemen in the booze business, America's system of regulation was designed to be willfully inefficient, thereby making the cost of producing, distributing, and retailing alcohol higher than it would otherwise be and checking the political power of the industry.
But are US beer prices really higher than those in the UK? I don't think so, but I'm not sure. It's hard to find good data on that topic. The best fast-and-dirty source I've found is the website PintPrice.com, which invites users across the globe to send in beer prices and then averages them nationally, converting prices into US dollars. According to this admittedly unscientific source, average US price for a pint of lager in a bar is $3.76 , vs, $4.76  for the UK. The "popular brands" of lager listed for each nation is different—Coors Light, Budweiser, Bud Light for the US; Carling, Fosters, Stella for the UK—but all of those brands are made by the Big Two: SAB Miller and InBev. Moreover, average disposable incomes are higher in the US than in the UK, meaning we have more available cash to spend on our (evidently cheaper) beer.
So what explains the divergent consumption trends in the US and the UK? I have no idea—resurgent American puritanism?—but Heffernan's claim seems off. However, the looming corporate threat to craft beer he teases out seems all too real.
19 Ноя. 2012